Taiwan Semiconductor Manufacturing Company
Semiconductor ManufacturingFounded 1987- Updated July 2025
Reviewed by Swet Parvadiya
Last reviewed: July 2025
CorpDigest
Taiwan Semiconductor Manufacturing Company
Company History
Founded 1987 in Hsinchu, Taiwan
Last reviewed: 2025-07-15 · By Swet Parvadiya
Morris Chang spent twenty-five years at Texas Instruments before the Taiwan government approached him in 1985 with a proposal: come to Taiwan and help build a domestic semiconductor industry. Chang, then 54 years old, accepted. He had a specific idea that no one had tried at commercial scale: a semiconductor company that only manufactured chips — no design, no product sales, no competition with its own customers.
The 1987 founding capital of $220 million came from three sources: the Taiwan government through ITRI held 48%, Philips Electronics contributed 27.5%, and private Taiwanese investors provided the remaining 24.5%. The government stake was not a subsidy — it was a strategic investment in domestic industrial capability, and it provided TSMC with the credibility to attract customers who might otherwise have worried about a new, unproven foundry.
The pure-play foundry concept took years to validate. The first major customers were small design firms that could not afford their own fabs. The business grew slowly through the early 1990s as the fabless model proved its commercial viability. TSMC listed on the New York Stock Exchange in 1994, providing access to international capital and establishing the company as a legitimate peer to US semiconductor companies.
The 28-nanometer process node, launched in 2010, was the inflection point that established TSMC's technological leadership beyond dispute. NVIDIA, Qualcomm, and Apple moved manufacturing to TSMC's 28nm process and discovered that TSMC's yields, consistency, and technical support were superior to internal fab operations at every customer that had previously manufactured its own chips. From that point, the fabless model became the industry default for new chip designers, and TSMC's capacity became the scarce resource that determined how quickly the industry could grow.
Morris Chang is universally credited as the inventor of the pure-play semiconductor foundry business model and one of the most consequential figures in the history of the technology industry. After founding TSMC in 1987 at age 55 — an age at which most executives are contemplating retirement — he built the company from a modest government-backed startup into the most important manufacturing company on Earth. Chang served as CEO from 1987 to 2005, when he handed leadership to Rick Tsai. He returned as co-CEO in 2009 following the global financial crisis and resumed full leadership, steering TSMC through its most significant technology transitions including the development of its 20nm and 16nm FinFET processes. Chang retired as Chairman in June 2018, handing the role to Mark Liu and full operational control to current CEO C.C. Wei. Now in his nineties, Chang remains an occasional public voice on semiconductor policy and Taiwan's strategic importance to the global technology industry.
Taiwan Semiconductor Manufacturing Company is incorporated in February 1987 with $220 million in initial capital from Taiwan's government, Philips Electronics, and private investors. Morris Chang establishes the company in Hsinchu, Taiwan, and begins construction of Fab 1.
TSMC completes its initial public offering on the New York Stock Exchange as an American Depositary Receipt (ADR) under ticker TSM, simultaneously listing on the Taiwan Stock Exchange. The listings give TSMC access to global capital markets and international investor visibility.
TSMC secures foundry agreements with NVIDIA, founded in 1993, for its first discrete graphics products. The relationship establishes TSMC's position as the preferred manufacturer for U.S. Fabless graphics chip companies and marks a turning point in the validation of the foundry model.
Riding the dot-com boom and the explosion of fabless semiconductor companies, TSMC's annual revenue exceeds $5 billion for the first time. The company begins construction of multiple 200mm and 300mm wafer fabs in Taiwan to meet surging demand.
TSMC introduces its 28-nanometer process node, a technology generation that proves remarkably long-lived due to its balance of performance, power efficiency, and cost. The 28nm node becomes the most widely deployed advanced logic process in history and anchors TSMC's revenue for nearly a decade.
TSMC introduces its 16-nanometer FinFET process, the first 3D transistor architecture deployed in high volume at an external foundry. Apple's A9 chip for the iPhone 6s is among the first major products manufactured at this node, cementing the Apple-TSMC relationship.
Morris Chang steps down as Chairman at age 87 after more than 30 years leading TSMC. Mark Liu assumes the Chairman role and C.C. Wei becomes CEO. The transition is smooth, reflecting years of succession planning and the institutional strength Chang built.
TSMC begins high-volume production at its 5-nanometer node, manufacturing Apple's A14 Bionic chip for the iPhone 12. Simultaneously, the company announces plans to build a $12 billion advanced semiconductor fab in Phoenix, Arizona, a direct response to U.S. Government concerns about supply chain concentration.
TSMC enters volume production at its 3-nanometer node, the first foundry to do so globally, initially for Apple's A17 Pro chip. The 3nm process represents a fundamental transistor architecture change and delivers approximately 15 percent performance improvement and 35 percent power reduction versus 5nm.
TSMC reports full-year 2024 revenue of approximately $90 billion, a 33 percent increase driven by AI chip demand. NVIDIA's H100 and H200 GPU families, manufactured at TSMC's 4nm node, account for a major portion of the acceleration. Arizona Fab 1 begins limited production at 4nm.
TSMC's first Japanese fab in Kumamoto begins production, manufacturing chips on 28nm to 12nm processes for automotive and consumer electronics customers. The facility, a joint venture with Sony Semiconductor Solutions and Denso, received approximately $3.5 billion in Japanese government subsidies.
TSMC begins volume manufacturing at its N2 (2-nanometer) process node, the most advanced chip manufacturing process in the world. Early customers include Apple for its A19 processor family and several major AI chip designers. The node uses a Gate-All-Around transistor architecture for the first time in TSMC's process roadmap.
TSMC established WaferTech in Camas, Washington state as the first TSMC-controlled semiconductor manufacturing facility in the United States. The facility was designed to serve U.S. Customers requiring domestic manufacturing for defense and government applications. The investment also gave TSMC operational experience in U.S. Manufacturing environments, labor markets, and regulatory frameworks decades before the Arizona expansion program.
TSMC acquired a significant stake in Global Unichip Corporation, a fabless ASIC design company, to strengthen its design service capabilities and offer customers integrated design-and-manufacture solutions for complex application-specific integrated circuits. The investment reflected TSMC's recognition that some customers, particularly in networking and communications, needed more than manufacturing services — they needed design support to translate their system concepts into manufacturable chip designs.
TSMC built a controlling interest in Xintec, a wafer-level packaging and testing company that provided specialized backend semiconductor manufacturing services. The investment was part of TSMC's strategy to offer a more complete suite of semiconductor manufacturing services, extending its value chain beyond wafer fabrication into packaging and testing. Xintec's wafer-level chip scale packaging technology was increasingly important for compact electronic devices including mobile phones.
Taiwan Semiconductor Manufacturing Company, known as TSMC, was founded on February 21, 1987 in Hsinchu, Taiwan by Morris Chang, a Texas Instruments veteran who had been recruited by Taiwan's government to lead its semiconductor strategy. The Taiwanese government, through the Industrial Technology Research Institute, provided 48 percent of the initial $220 million capital. Philips Electronics of the Netherlands contributed 27.5 percent in exchange for technology transfer and patent licenses, and Taiwanese private investors supplied the remaining capital. The founding charter was radical for its era. Rather than design and sell its own chips like Intel or Toshiba, TSMC would manufacture chips designed by other companies, becoming the world's first dedicated pure-play foundry. Morris Chang had developed this dedicated-foundry concept while pitching it inside Texas Instruments and General Instrument, where it was rejected. With Taiwan's government and Philips as patient capital partners, Chang built TSMC into the foundation of the global fabless semiconductor ecosystem. Today TSMC produces chips for hundreds of design houses including Apple, Nvidia, AMD, Qualcomm, MediaTek, and Broadcom.
TSMC was founded in 1987 specifically to be a contract manufacturer that did not design, brand, or sell its own chips, only fabricating wafers for customers under their own designs. Before TSMC, semiconductor manufacturing was dominated by integrated device manufacturers like Intel, Motorola, Texas Instruments, NEC, and Toshiba, which both designed and produced their own chips. Some IDMs offered limited foundry services as a sideline, but the conflict of interest deterred fabless designers from sharing their intellectual property. Morris Chang's insight was that a dedicated foundry, without internal product lines, could win the trust of fabless customers and unlock a wave of new chip design firms that lacked manufacturing capital. The model worked beyond anyone's expectations. Companies including Nvidia, Qualcomm, Broadcom, MediaTek, AMD, and ultimately Apple's silicon division emerged in part because they could rely on TSMC for manufacturing. TSMC's pure-play model is now widely emulated, and competitors UMC, GlobalFoundries, SMIC, and Samsung Foundry all operate variants of the dedicated-foundry approach. TSMC remains by far the largest of these foundries.
TSMC's dominance of leading-edge chip manufacturing was built over decades through compounding investment, customer trust, and aggressive process roadmaps. From the 1990s onward TSMC consistently outspent rivals on equipment and R&D, leveraging cash flow from the entire fabless ecosystem to fund newer nodes. In the late 2000s and early 2010s TSMC overtook IBM, GlobalFoundries, and most Japanese rivals in process leadership, and around 2018 it surpassed Intel as the most advanced commercial manufacturer when it ramped 7-nanometer production while Intel struggled with 10-nanometer yields. TSMC introduced 5-nanometer production in 2020 and 3-nanometer production in late 2022. The company also pioneered EUV lithography at scale, deploying more ASML extreme ultraviolet lithography tools than any other foundry. As of recent reporting TSMC commands an estimated 60 percent of total foundry revenue and approximately 90 percent of leading-edge logic manufacturing below 7 nanometers, with Samsung Foundry the only credible second source and Intel Foundry Services attempting to catch up by the late 2020s. Customers include Apple, Nvidia, AMD, and most other major designers.
TSMC is headquartered in the Hsinchu Science Park in Hsinchu, Taiwan, with its principal corporate campus, R&D center, and earliest fabs located there. Most of TSMC's manufacturing capacity remains in Taiwan, with fabs in Hsinchu, Tainan, Taichung, and Longtan. The company's most advanced fabs and the GIGAFAB clusters at Fab 14, Fab 15, Fab 18, and Fab 20 are concentrated on the island. To address customer geographic diversification and geopolitical risk, TSMC has expanded internationally over the last decade. The Arizona Fab 21 project near Phoenix represents more than $65 billion of investment across multiple phases announced through 2024. The Kumamoto, Japan joint venture JASM with Sony and Denso opened production in late 2024. The Dresden, Germany ESMC fab with Bosch, Infineon, and NXP is targeted to begin production later in the decade. TSMC also operates design centers and offices in San Jose, Shanghai, Singapore, Munich, and elsewhere. The company employs more than 70,000 people globally, the majority in Taiwan.
TSMC's founding was a product of Taiwan's deliberate industrial policy in the 1980s. The Industrial Technology Research Institute, or ITRI, had been working since the 1970s to build a domestic semiconductor industry through technology transfer agreements with RCA and Philips. By the mid-1980s Taiwan's leadership, including K.T. Li, then minister without portfolio and a key architect of the island's technology policy, concluded that Taiwan needed a flagship semiconductor manufacturing company. Morris Chang was recruited from the United States to lead the new venture, and the government committed 48 percent of the initial $220 million capital through ITRI and the National Development Fund. Philips Electronics took 27.5 percent in exchange for technology licenses and process knowledge, and Taiwanese private investors funded the remaining 24.5 percent. This public-private structure gave TSMC patient capital, access to Philips' process technology, and political support, while leaving operational control to Chang. The model has been studied as a template for state-supported strategic industries and is part of why TSMC remains intertwined with Taiwan's national interest today.